tv Book Discussion on Money CSPAN December 24, 2014 1:00am-1:55am EST
[laughter] this guy is quick. i am watching him it depend on the questions he asks for gore really does. if you read the book he could get someone at risk day. [laughter] wait a minute. [laughter] is to say to you great loves. and i said to have it all wrong. and should have said saks first. [laughter] >> my mom is is a the front row.
it got deathly quiet. this is mike huber. so i stood right next to him by an 6-foot 8 inches there five-foot to reduce dyewood lean down. is everybody is waiting and then i said boo. [laughter] out gate of the cameras there all looted to get their picture taken with the 2e mail it back to china i guess who i had my picture taken with? [laughter] >> this is very sweet.
this is more of the declaration of gratitude. thank-you to john and bath to stick to your ideals to put the assistance of others before your own and for whom we should be grateful. you are truly the original american hero. [applause] >> so for the final question today please answer where do think the american of furniture industry will be in five years? >> that what he would say in
bedroom furniture is what it is not what comes from china but most of it is made in the united states. so it is the different fabric in different things that shot -- that drives the chinese crazy. [laughter] we are used to it because we grew up with it but they can make over there but if you ask me what will happen in an with the company in new york the amish have so that they are quite expensive and i will tell you a story about that if we have tied.
but literally i counted 125 factories that i know had closed. virginia and north carolina said tennessee. we are it. but for five years ago they said john what our real going to do? we are fighting this a battle. it's not over with. so you do all this to talk about business meetings it i could see that i is a class over. bid i always try to tell the story. abraham lincoln was because
they don't necessarily remember. so i was trying to think of something. i want you to think about 12 men on an island. one woman. one female. i've got news for you. she doesn't have to be beautiful. i can guarantee you somebody will fall above. head we intend to be the girl. [laughter] [applause] >> 8q for being here tonight into all of you for coming her carry tremendous banks to staffa and volunteers of state -- of saint john is a
followed by this year's white house decoration store and the lighting of the white house christmas tree with members of congress at 8:00 p.m. eastern on c-span. >> steve forbes and elizabeth ames trace our current economic troubles to the ending of the gold standard in the 1970s and discuss what the weak us dollar means for the global economy. they call for a return to the gold standard coming up
next on book tv. >> we are very privileged to have with us this evening a very recognizable figure in the media and business world. steve forbes is editor in chief of forbes magazine, the nation's leading business magazine, and he has headed a media a media company that includes not only asian and european editions but a number of web properties focused on politics, sports, and financial markets. many of you we will also steve's spirited campaigns for the republican presidential nomination in 1996 and 2,000 during which the idea of, among other things, a flat tax along with the new social security system, medical savings account, term limits, and a strong national defense. this evening steve comes to us as an offer, which also
is not a new role for him. he has written or cowritten five previous books. his sixth and latest one, "money: how the destructon of the dollar threatens the global economy - and what we can do about it", is every bit emphatic as is really works. anyone familiar with his free-market libertarian views will not be surprised to read his criticism of central bank and existing monetary policy with the fed winding down, he sees and especially opportune moment to rethink our monetary system and ensure a more a more sound and stable currency by returning to the gold standard. he writes in the book, freeing the dollars from gold was supposed to make the united states stronger. instead, it has made the country weaker.
something must be done. ladies and gentlemen, here to explain what needs to be done along with his co-author, elizabeth ames, steve forbes. [applauding] >> thank you very much, brad. thank all of you for coming out. as brad indicated, the book is about money, month -- monetary policy. money and particularly monetary policy is one of those topics that seems to intimidate a lot of people for some strange reason. as a result, the federal reserve, for example, has example, has less formal oversight from capitol hill and congress then do our intelligence agencies. the thesis of this book is that, one, the topic of money is straightforward and
simple even though it is shrouded in jargon, equations, the idea of money is basic. we basic. we have gotten away from it, and our policymakers today know less about money, monetary policy than they did 100 years ago. since the early 1970s even though he had booming decades in the 80s and 90s, overall our growth rate since we went off the bretton woods system in 1971 , the us average growth rates are less than they were before 1971. if we had maintained by growth rates that we had for 180 years up until 1971 on average the us economy today would be 50 percent larger than it is now. forty years compounding and in effect reversed compounding adds up to a lot. favor for a moment having 50 percent higher income,
would it mean for the social divisions. this thing, overturned, adds up. it is a critical reason why it takes to incomes in the family to do what one could in previous generations. the debasement of the dollar is a critical part, and when this happens, happens, when you do not have a stable currency you end up with people not getting ahead the way that they should, meaning incomes are not growing annoyed that they should and as my co-author will discuss in a few minutes, a fraying of social fabric, reduction of social trust and more divisions. and it is a process that process that not one in a million will be able to diagnose. that is why we wrote the
book. now, since monetary policy does not usually get the heart beating aflutter the way some of the reality shows to i will begin by giving you an advanced report, to give you a travel if you ever find yourself in an airplane in coach, middle seat, on the runway, watching our, watching your life pass away and want a little bit of elbow room, start talking about monetary policy. they will cut you a wide berth. so as a result of the chaos that we have had, slow-moving since the 1970s, the 1970s, the federal reserve has gotten up in terms of more and more power , but the more power it gets the worst we are. you take quantitative easing
, even though they are not tapering, which is a good thing, it ended up contracting the economy rather than stimulating the economy. in terms of money the thing i understand about money, it is basic. it makes transactions, buying and selling which is how we prove our standard of living, which is how we exist, makes it much easier. in the old days we had parker, which was inefficient. let's say i sold an ad in forbes 3,000 years ago. perhaps with a herd of goats. i am being a little facetious, but let's but let's say i wanted to buy ipads for our writers. i went to the apple store 3000 years ago with my herd of goats. the store owner says, i don't want goats. i want sheep. maybe i have to hire a sheepherder because the sheepherder wants to be paid
in wine. i have read. he wants white wine. imagine if we still had parker today, trying to deposit a cow in an atm. it becomes very inefficient. in essence what money does most of the time does not have intrinsic value. but it makes transactions easier, and in that sense money measures value. that is all it does, the way clocks measure time, scales measure weight,, rulers measure length, money measures value. because it represents value, makes transactions easier, and in that sense as a form of communication and lets you know information to do all the billions of transactions we do. some money in and of itself is
not wealth but represents a claim on products and services. think of it as you would a coat check. your coat in a closet in a coat check and it represents a claim on the coat. so the idea that creating money, money represents products and services that have already been produced. so t w money represents products and services that have already been produced. printing e like a restaurant saying if we create more coat checks that will stimulate the production of more codes. no, it does not. it's a claim. it represents a claim on a product or service, money does. so money works best when it has a fixed value so just like the clock has 60 minutes in an hour. imagine what the world would be like and what daily life would be like if the federal reserve did to clocks were due to the dollar. imagine floating the clock so you have 60 minutes one day, 48 minutes the next and 22 minutes
the next, 80 the next you would still have to have hedges and derivatives and futures to figure out how many hours or working a day. let's say you are baking a cake. bake the batter at 45 minutes. you have to figure out is that inflation-adjusted minutes are real minutes? it just makes life much more difficult. imagine what would happen if they change the number of inches and a foot. you are building a bridge. some of you have learned instead of 12 inches is 10 inches. imagine building a house. just makes things much more chaotic. so money works best when it has a fixed value and then the question becomes what's the best way to do it? even though it's absolutely out of fashion in the economics profession the way it works in this country for the first 180 years of existence is you fi fit to gold. why gold? because more than anything else in the world gold keeps its intrinsic value. it has for 4000 years.
he can't destroy it. every ounce of it has been mined and is still in the world today. it has been pointed out that the gold ring you are wearing may have certain grains going back to egyptian pharaoh times. you can't destroy it. it's hard to make but not too hard so you don't get to do much of it at a time. because you can't destroy if you find a big goldmine. you don't get a lot of gold. the california gold rush which was one of the biggest ever only increase the annual supply three or 4% and then taper down back to the average of 1.5 or 2%. so unlike wheat, you don't get droughts are things like that so you don't have to worry about storage and about mice eating the gold. so whether you freeze it for heated or beaded up you can't destroy it because it's got unique properties. so it stood the test of time for 4000 years. now people think if you mention
gold does that mean we have to have gold coins in 100% backing in all back? think of gold issue with the ruler. it's just a fixed measure of value so let's say you fix the dollar of gold at $1200 an ounce. all that would mean is if the one above 1200 in the marketplace, $1200 an ounce that has created too much money so it creates less money. if it goes below 1200 it means you've got to create a little more money so that the marketplace determines the need of what's needed in terms of money. if you have a vibrant economy you are going to create more money. you don't have to own an ounce of gold to do it. the british ran it with the gold standard with very little amount of gold. they knew what they were doing and they responded to signals in the marketplace and it worked right up into world war i which lasted along with a lot of other things. so gold golden that sense is like the ruler.
the fact that a mile has 5280 feet does not restrict the number of miles of highway you can build. just to give you one little factoid that you can use at a cocktail party to show how brilliant you are from the time of arch distance, go back to the revolutionary war in 1775 when we were a small agricultural nation, up to 1900 population increased 20 five-fold. we went from a small ad nation to the mightiest industrial nation in the world. during that period of time the amount of gold mined in the world went only up 3.50. the money supply went up even though the dollar was fixed at gold. so gold just make sure the value stays fixed. it does not restrict the supply. if you have a vibrant economy that sustains the marker placement in a stagnant economy you don't created so it's just very very very basic. so when people lose sight of
that, when you end up having what we have had since 1971. we have gone from one crisis to another. we had a terrible decade in the 70s. we got a semi-right in the 80s and 90s and boy we moved ahead but in the last decade we went backwards and starting, and this is not a partisan thing started under the bush administration, treasury department federal reserve started to weaken the dollar. they thought that would stimulate exports and that's how we got the housing bubble. anytime you undermine the integrity of the dollar, people don't own hard assets. in the mid-1980s the last decade the average price of a barrel of oil was a little over $21 a barrel. what is a two-day? 80, 90, 100 this crisis may not get up to 110? in the 70s if any of you are old enough to remember the 70 70s. [laughter]
tried politics which didn't work which is why i'm peddling books now but back in the 1970s, oil went from $3 a barrel last time when off the rails to almost $40. everyone thought we were running out of oil and we were going to go to $100 then reagan came and with paul volcker and they killed the inflation in the 70s. oil went crashing down to $10 a barrel and averaged $2225 a barrel. it's like putting a virus in a computer. if you don't trust the value of money what it means is you get less investment, investment is less productive because you buy existing things rather than things for the future. investing is risky enough that you don't know whether you're going to get back the $110 for a factory that may not pay over five years or 100-cent dollar, 80-cent dollar, 20-cent dollar. that is more uncertainty which is why you can stagnate dead in
the water by our historic standards. so that's why we wrote the book "money." educate about money. with money represents value. gold is the best way to fix that value. if we understand that then we can move ahead and get back to the growth rates we had before 1971. obviously there are a lot of other things we have to do but experience shows us if you don't get the money right in terms of the fixed value you get other things right. you have the tax is right in the spending right, the regulations right but if you don't get the money right it's just going to undermine everything else. this is the basis of everything else. the basis of transaction come the basis of trust, the basis of investment and when it works we don't realize what makes it wo work. it's like the air. when it's cleanly taken for granted and when we have pollution oh my goodness there is important. so money is the same way.
one aspect of money gets overlooked because we always focus for me think of money and economics, gdp and the like, is social trust. we have a chapter which lives will discuss for a few moments talking about how debasing money to base a society. it undermines the fabric, the social fabric and the ways that go beyond simply gdp numbers and exchange numbers. so i will call up elizabeth but one thing to keep in mind is that when money is stable and value brainpower goes for conductive use. just one example before 1971 when currency didn't fluctuate because we were at fixed gold. little currency trading. now currently trading is a huge activity all around the world. daily volume over $3 trillion. tens of thousands of the best brains in the world focusing on an activity would not exist if
we had stable money, brainpower that could be used for medical research, other things, productive things. so this thing has consequences that go beyond merely gdp in qb and whatever acronyms that drought. with that let me say thank you and turned over to my elizabeth elizabeth ames. [applause] >> good evening. it's good to be here and i would like to talk a little bit about that chapter, chapter 5 which is money and morality, how debates and money to base a society and people have found this chapter particularly thought-provoking about money. starts out with that quote a famous quote from john maynard keynes and i will read it and in its entirety. lenin was certainly right. there is no set -- subtler sure
means of overturning the existing society than to the bots the currency. the process engages all the hidden forces of economic laws on the side of distraction and it does it in a manner in which not one man in a million is able to diagnose. and we say in the book that unstable money is a little bit like carbon monoxide. it's odorless and colorless. if you don't know the damage it's doing until it's nearly too late and people are really not always aware when the government is tweaking the currency and they only see the effects which is one reason why debasing money is so corrosive. people say money is about greed but in fact it's about trust. money from strangers from all nations and societies in all walks of life come together and conduct transactions based on a commonly agreed-upon measure of value. money promotes cooperation between people. it serves as an instrument of
communication as well. it tells us what society values not just materially but what its priorities are. so when money is corrupted its ability to act as a facilitator of cooperation is corrupted as well. unstable debased money and of mind survival relationships between buyer and seller, between lender and debtor. the philosopher john locke described this issue that is produced at societies correnti wrote, and you have also heard this as well, whether the creditor is forced to receive less for the debtors be forced to pay more than his contract the damage and injury is the same whenever a man is defrauded of his due. and during periods of unstable money you often see a particular scenario unfold scapegoating corruption social unrest and
increasingly coercive government. in the worst cases it can unleash forces of political extremism that can lead to the rise of dictators. recently an investment strategist named dylan rice wrote a particularly good piece describing this classic scenario that has occurred throughout history. it he points out that monetary debasement has coincided not only with persecution of pre-world war ii germany but also with the french revolution's reign of terror in the salem witch trials and other bloody episodes through the centuries. but this kind of distraction of trust and unrest is not just a remote historical occurrence. it's taking place in many areas of the world today such as the middle east, europe and to a certain extent the u.s.. analytics south african investment advisory house has issued reports which predict the worlds most likely troubled
spots. the firm has been able to forecast unrest based on nations rates of monetary abuse and syria which has suffered nearly 200% hyperinflation topping the list in february 2013 followed by argentina, south africa, egypt india and turkey all of which have been in slaters. of course there are causes for events unrest and it takes different forms in different countries with unstable money in all cases has been a catalyst. the riots of the arab spring for example you may remember started over increasing food prices. the financial crisis is very much a lockean betrayal of tru trust. it helps create a housing bubble and pulled out the rug out from under borrowers and this led to ultimately the collapse of some financial become a wave of foreclosures which led to the
collapse of major financial institutions and triggered the stock market meltdown of 2008 and that in turn set off a worldwide destruction of trust that ricocheted from one continent to the next. in europe bank failures and bailouts shook the confidence of global investors helping bring on the sovereign debt crisis over there. we all remember those days and i will read a "from an economist from deutsche bank told "the new york times" in this day and age a bank run sprints around the world not around the block. once a bank run is underway it doesn't matter if you have good ones are bad loans, people lose confidence in you. that obviously shows this is really about trust. this worldwide loss of trust quickly could turn to rage riots and protests and we say in the book it went from balance sheets to the street. in 2012 there was a poll by the pew research center that we cite
in the book that says america is more polarized than any other time in the past 20 years and what they basically said most of the increased polarization is taking place not just in the last few years but the presidencies of both george bush and barack obama and both administrations were a weak dollar administration so was definitely, this polarization has coincided with the weakening of money. basically when money is weekend there's a sense of increasing unfairness that the system is rigged that you are being defrauded. people on fixed incomes and salaries see their money-losing value while other people are reaping what looks like artificially unfair windfall gains. and the link between effort and reward is severed. that is why an economist of an unstable economy get more corruption and crime.
a number of studies have found that inflation actually has a stronger connection, actually a stronger connection to crime than joblessness. crime rates in the u.s. dropped immediately after the financial crisis when there is a serious deflation that they began to move up in 2010 during quantitative easing which is an interesting thing we say in the book. these are just a few highlights from the chapter and both left and right agree today that this is a period of malaise that we hope this book helps people put aside some of the finger-pointing that has been taking place in recent years and helped them recognize the role of the unstable dollar as the catalyst and culprit. thank you. [applause] >> we now come to q&a. as brad said if you could come up to the microphone if you have a question.
feel free to ask away. >> i guess rather than trying to debate the ideas here of the concept of stable money and so forth i guess i would just ask this. why is it that so many countries including the united states have dropped the gold standard and why is this this theory so unpopular? you mentioned the fact and he gave the quote from keynes who said one in 1 million will
correctly diagnose the problem. so that's kind of a hand that there are some basic fundamental reason why it's hard for people to understand and for other economists to accept the theory. why do you believe that there are so relatively few economists that accept your proposal? >> the reason the gold standard lost dominance that it has in terms of intellectual circles was the result of two catastrophes. one was the first world war which began 100 years ago this year, destroyed the classical gold standard. after that war because the standards work so well they didn't really realize what made it work. and so britain did not do it right trying to go back to it. that led to her example after the war they tried to ignore the
inflation that the first world war created to try to re-peg gold to its prewar price which is ridiculous if you have doubled or tripled your money supply and recognized you had a one-time catastrophe and to do a reevaluation. they didn't do it so they harm their economy that way. keynes came along and others and this sounds a little arcane but it's basic. classical economists say the real economy is the production of products and services. the money economy is the symbol of products and services. kaine work -- change reverse that and said money is the real driver of the economy and is the production of products and services that respond to the money so we have reversed it and put the cart before the horse. ..
in they were desperate for solutions. in node was triggered by a hideous trade war that we blew up the global trading system and everyone retaliated. then they made it worse by raising taxes. as the depression was ongoing we raise the top income-tax rates overnight from 25% at the 63%. excise taxes were enacted on numerous items including the stamp tax on checks. in the nearly 30 is if you wrote a check to pay a bill you had to pay a tax to the government for using a check so the massive tax increases came in u.s. and britain and germany went berserk so there was a downturn.
so let's try funny money. so they started to devalue the pound so one bad day and was done after the other. despite that we still got a gold standard after the war with the redwoods -- britain once but use monetary policy to use the government was so prevalent they did not know how to preserve the system which is why we blew it up gratuitously 1971 and we have been floundering ever since. gold was $350 an ounce with some fluctuations but had a c plus for monetary policy. so we got growth from it but then the early part of the last decade we went off the rails again is still have not dug ourselves out.
to catastrophes road or one in great depression and now is beginning to reverse below the radar screen. and maybe we should examine things again. getting back to basics on many. getting the conversation going to get back on track. with the bureau of weights and measures. and if you ever return -- run into a federal reserve official asked them. they say they want to .5% inflation because they believe it stimulates the economy. that translates into extra
thousand dollars per year of expenses. who gave you the authority to tax an extra $1,000 per year and by a disaster relief economic activity? i have asked i have not gotten an answer. >> it just seems i believed you are correct something is wrong with the money but is not a broad enough assertion to cover what is happening economically is so much more sophisticated of your analysis. but the value of gold fluctuates in that was artificially created by legislating it as the center of the value of money. it had the reverse effect
with said debt crisis is in default the world and not come to london to it shot up to $870 an ounce before going back down after the election of reagan. so that is about the perceptions of the currency's. but for legislating a value the reason gold rose up was not bankers to say do this but out of the marketplace every it quickly went into the 19 business it could not keep their hands off of it. but monday rose with people doing transactions with each
other it was spontaneous. with isaac newton did 300 years ago was to codify what people thought needed to be done. so under a constant attack from spade -- spain. they have dayaks' they are under water but because of the sound muddy with sophisticated money they become the vigil center even before london because even on paper they have nothing it was the second tier power before they did this. but having stable money brought it together. so the market place is set over 4,000 years in this is the way to do it and as a
result economy's always get more complex with more growth. with the division of labor and jobs rise up. a few years ago you said apps is that applications for college? if you said ipod is that a remake of the monsters from the ipod people? it is stuff you cannot even imagine so it is of fixed measure of value to improved standard of living with trading in specialization so will have to spend our time growing fruit or hunting mastodons that is what you get with fixed money. >> giving thus saving dependence of monetary policy whenever they feel
like it what is the return to the gold standard look-alike for the market? >> if we decide to do it and i hope we do but we have been drifting milanov ford yourself and by the way there is the congressman and representative brady who has proposed a bipartisan commission and to examine monetary policy and it is a good start to get the debate going. by going on a gold standard of what it would mean over time you have a much bigger economy. there is a lot of myths but when it crashed of market? catechizes deflationary in
the bad times for farmers. and allows the human kind to search for word. gold did not lead to agriculture but we learned to grow more food. take corn. right now typical in the '30's produced 27 bushels per acre. today it is 150 in there is a man in iowa who was about to invent breakthroughs with corn leading 300 or 400 bushels per acre. agriculture today's 2% but it used to be 60 years 70% 100 years ago. railroads employed 1.2 million the today but is
less than 200,000 but carry 10 times as much freight. so economies are always adjusting but you always want to adjust upward rather than stagnation in wondering if my going to get ahead. reanalysis 1600 for a clean and i a weird like that. this is a $1,923 worth $20 to day and after learning golden silver you kidnap by the sale of gasoline before 1964.
all quarters or dimes are half dollars in dollars or 90 percent silver. that was some wind blowing fact. hugo to a coin shop bid is worth $20 but then you'd take that $20 bill to buy the same amount of gasoline as you could have been 1964 so that tells you the price of gas has stayed constant in relation to gold and silver but the price today of gasoline rose because of the purchasing power of the dollar has gone down. the second most interesting mind blowing fact is 10 times is exactly the same weight as the silver dollar and four quarters is the same weight as a silver dollar and two half dollars is the same weight as the
dollar so before the dimes were smaller for reason. 2.5 times is to save weight as the corridors so you talk about gold so what about silver coming into picture? >> in terms of the ideal society is never right deal with human beings. but going back more going for word what we did the first 180 years of existence from washington and hamilton to fix it to gold write-up and tell nixon fluid up in 1971 with the applause of the so-called experts. then go back 13 years before we went off the rails again big time. 1 gallon of gasoline was $1. imagine what life would be
like today for $1 that was only 12 years ago. but in terms of silver for centuries there will roughly have the same relationship. but what happened in the 1870's was people started to use more paper money. starting with hamilton so they could get accustomed to the money economy. but with the rise of paper they did not need points so the demand for silver fell so by the 1890's was 30 / one today it is 60 / one so gold has held up better than silver but your point that money has a constant value like oil or the gallon of gasoline have remained